Register for PAYE

Employing staff members indicates healthy growth of your business, but it also comes with added responsibility – and this is true in relation to your tax responsibilities as well. As an employer of staff, SARS requires that you register for employees’ tax.

Effectively, this makes you, the employer, an agent of the Government, deducting from the earnings of your employees and paying this tax over to SARS each month. This functions as credit that is set off against the final tax liability of your employees, which is determined once a year.

Employees’ tax includes SITE (Standard Income Tax for Employees) and PAYE (Pay-As-You-Earn). You have to register as an employer for employees’ tax if you pay salaries that exceed the tax thresholds. In other words, your employees become liable for tax if their annual salary is R40 000 for individuals under 65 years and R65 000 for individuals 65 years and older, and need to be taxed accordingly.

Independent Contractors

If you have independent contractors working for you under subcontractor agreements, they can be made responsible for their own tax payments, thus relieving you of the hassle of having to send in monthly PAYE for people who work for you on a contract basis. But, make sure that you have proper contract agreements in place before you wash your hands of the responsibility of contractors’ PAYE.

SARS can still query why you haven’t paid PAYE for these contractors if it comes to light that they haven’t been paying tax themselves, and it pays to have all the paperwork in place. It’s also a good idea to ask small contractors to include their tax registration number on their invoice as an additional measure to ensure that they are indeed registered for, and paying tax. From a casual or part-time employee point of view, bear in mind that you have to deduct 25% tax from casual workers if you pay them more than R65 a day.

Also bear in mind that as a member and/or director of a company, you are classified as an employee. This means that your company or close corporation (CC) needs to register for PAYE even if you are the only employee. Failure to deduct and withhold PAYE on remuneration due to directors of companies and members of CCs will result in the imposition of penalties, currently imposed at a rate of 10%, as well as interest.

How To Register For Employees’ Tax

So how do you go about registering for employees’ tax? Firstly, you need to complete an EMP101 form and submit it to SARS. This form is available at your local SARS office or online (www.sars.gov.za, under Forms). In it you need to include information relating to your name and the name(s) of your partners if you operate in sole proprietorship or partnership, or the name of your CC or company.

You will also need to submit your street and postal address, business telephone numbers and the number of people that you employ. Registration as an employer is free. The Receiver will let you know when they have received the forms and may ask for additional information before registering you as an employer. They will let you know which Revenue office you are registered with and provide you with the latest EMP 10 – Guidelines for Employers book, which contains the relevant tax tables for you to work out how much tax you need to deduct from each employee’s salary every month.

Once you are registered, SARS will send you a monthly return (an EMP201) and it now becomes your responsibility to complete and submit this form, every month, together with the amount of tax you deducted from employees’ salaries. You need to do this within seven days after the end of the relevant month. SARS will send you a receipt which you need to keep on file. Once a year, you will be required to add up all the PAYE tax paid and fill in an IRP501 form and submit this to SARS. At the end of February each year, you will need to give each employee an IRP5 form which shows how much tax they have paid in that year.

Quick Tip

As an employer, you need to register whether you are a sole proprietor, a partnership, a company or a close corporation. Most employers are clear about their responsibility to deduct PAYE from their permanent staff, but the waters tend to get a little muddy when it comes to contractors and casual or part-time staff.

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7 Direct And Indirect Taxes You Should Consider Before Registering Your Business

If your business has been registered, guess what in the eyes of the law your business is now a legal entity, congratulations. What does this mean? Well this means your business is a distinct legal entity separate from you in the eyes of the law, this means your business can now enter into contracts to purchase assets, utilise debt instruments and hire staff amongst other things. This unfortunately also means your business is subject to tax compliance. Let me try and give you a snapshot of what taxes to be aware of as a business owner however not all will automatically be applicable to your business.

1. Income Tax

Income tax is one of the state’s main sources of revenue and is levied on taxable income determined in terms of the Income Tax Act. All businesses must be registered for Income Tax. It is illegal not to be registered for Income Tax if you have a business.

2. Provisional Tax

The payment of provisional tax is to assist taxpayers in meeting their tax liabilities by way of installments out of their taxable income. Income tax is only paid once the full 12 months of trading is complete. It would be impractical to expect taxpayers to pay one large lump sum of income tax to SARS. Companies automatically fall into the provisional tax system.

3. Small Business Corporations Tax

SBC Tax was introduced as a tax relief measure for small business. SBC Tax will not be calculated on the flat 28% of taxable income. Dependent on your annual taxable income, you will be liable at the percentages in the table.

4. Pay As You Earn

Employees’ tax refers to the tax required to be deducted by an employer from an employee’s remuneration (salary) paid. The process of deducting or withholding tax from remuneration as it is earned by an employee is commonly referred to as PAYE.

5. Value Added Tax

This is an indirect tax levied on the ‘sale’ and ‘purchase’ of goods and services. This tax is not compulsory unless your turnover has exceeded R 1 000 000 mark however you choose to register voluntarily if it makes sense for your business strategy.

6. Unemployment Insurance Fund

UIF contributions are compulsory for all employees working more than 24 hours a month. The contributions are paid to the Department of Labour (DOL), or can be included in the SARS payment of PAYE on the EMP201

7. Workman’s Compensation

An employer must register with the Commissioner within seven days after the day on which he employs his first employee, (this includes the Director or Owner of the company)

You might be thinking tax compliance, what’s the big deal? I’ve been doing that most of my adult life, well personal tax is very different to business tax. As the director of your newly registered business it is assumed that you have done the research as to what laws to comply with as a business owner. In reality however the thrill of having a business overshadows the mundane compliance elements that go hand in hand when running a business. Let’s face it as much as your business is now a legal entity your business won’t do the research and comply with the necessary taxes on its own that responsibility lies with the director and when I say director I mean you.

Tax Refunds – What You Need To Know

Most taxpayers are not aware of the requirements for a tax refund to be facilitated and SARS very often will delay paying out the refund. In this article, we will look at the requirements taxpayers need to be aware of and the Tax Ombud’s report on the investigation into alleged delayed payment of refunds as a systemic and emerging issue in terms of section 16 (1) (b) of The Tax Administration Act No. 28 of 2011 (TAA).

What you need to know as a taxpayer:

The tax refund must be claimed within 5 years from date of submission of the return.

SARS has the right to withhold the refund as per section 190 (2) of TAA: “SARS need not authorise a refund as referred to in subsection (1) until such time that a verification, inspection or audit of the refund in accordance with Chapter 5 has been finalised.”

Authorisation of payment of refund done once SARS is satisfied with the acceptable security provided by the taxpayer in terms of section 190 (3) of TAA: “SARS must authorise the payment of a refund before the finalisation of the verification, inspection or audit if security in a form acceptable to a senior SARS official is provided by the taxpayer.”

As a taxpayer, you need to ensure that you verify your banking details with SARS and that there are no outstanding returns in order for your refund not to be delayed.

Any decision not to refund by SARS is subject to an objection and appeal by the taxpayer in terms of section 190 (6) of TAA.

Refunds less than R100 are not refunded but carried forward to the next tax period.

To view the status of your refund you can use the Refund Dashboard on efiling under the ‘Returns History’ tab for the tax period in question or contact the SARS call centre.

Interest starts accruing from 21 business days from the date on which the refund became due, i.e. verification/audit outcome finalised.

Tax Ombud’s Report

The Tax Ombud’s report identified various mechanisms used by SARS to defer or delay the payment of refunds due:

SARS failing to link submitted supporting documents at a SARS branch to the main file.

The use of special stoppers on taxpayers’ accounts and the delay in lifting the stoppers, e.g. being required to verify banking details in person at a SARS branch. Even after the verification is done, there is still a lengthy delay in paying the refund.

Using the filing of new returns as an excuse to block refunds. The system blocks already verified refunds the moment a subsequent return is submitted by the taxpayer.

Withholding of refunds for one period while an audit/verification is in progress on another period. This is contrary to section 190 of the TAA.

The use of historic returns suddenly reflecting as outstanding but these have never been shown as outstanding on the Tax Clearance Certificate or the Statement of Account.

The raising of assessments and passing of journals to absorb credits on taxpayers’ accounts, i.e. overpayments. In doing so, SARS creates fictious tax liabilities instead of making a decision on the refund.

Requesting further information during the audit to delay finalisation, thus delaying the time frame from when the interest accrues.

No turnaround time for assessments successfully disputed.

Obstacles regarding diesel refunds.

Raising of assessments prematurely before the 21 days to submit the supporting documents

Refunds for periods that have been verified automatically set-off against bad debts on other periods not withstanding a request for suspension or where there is the suspension of payment. SARS may not instate any collection steps from date of submission of request for suspension of payment until 10 days after decision to not grant the request has been communicated to the taxpayer in terms of section 164 (6).

You are able to object/dispute any SARS decision not to release the refund on efiling or through your tax practitioner.